Logistics’ Two Fronts

Amazon and UPS are behemoths. Socialists can shake the foundations of the US economy by agitating and organizing at both.

Silus Grok / Flickr

The modern economy revolves around the sprawling logistics industry. Nothing demonstrates this more clearly than the current situation at Amazon and UPS. If Amazon makes good on its recent pledge, it will add another 100,000 workers to its US workforce by 2018, making it one of the country’s largest — and one of the largest nonunion — employers.

The US labor movement faces several existential threats right now, but Amazon’s is a special kind. The company’s breakneck expansion has revolutionized the logistics industry. Its impact is most deeply felt at United Parcel Service (UPS), the country’s largest private-sector, unionized employer, with nearly 250,000 of its workers represented by the Teamsters.

UPS already lashes the Teamsters with the threat of Amazon undercutting the union’s gains to justify the miserable wages paid to part-timers, impossible productivity demands, and the subcontracting of union work to non-union contractors. It will no doubt use the competition from Amazon to demand further concessions from the Teamsters during the next round of contract negotiations.

Teamsters United (TU), the reform challengers in last year’s union election that nearly toppled the scandal-ridden and unpopular incumbent Teamster General President Teamsters James P. Hoffa, recently announced the launch of a new UPS contract campaign. Fred Zuckerman, TU’s candidate for general president, told supporters, we “are going to have to fight for ourselves.”

Such a campaign has the potential to take on the package giant, but it can also serve as a beacon for future activists among Amazon’s rapidly expanding workforce. And if socialists in the United States can develop an industrial organizing strategy, we can play an important role in helping to organize some of the most powerful workers in this country.

Seattle Origins

UPS was founded as a bicycle messenger service in 1907 by James E. Casey. Casey, known for his taciturn personality, did few interviews during his long tenure as the company head.

Forbes magazine in 1970 dubbed UPS the “Quiet Giant” because of the stealthy way it snuck up on and overwhelmed its rivals. The company did little to no advertising. Forbes reported that UPS “officials believed only one parcel shipping company could exist in the United States, and it hoped that keeping a low profile would prevent anyone from copying its methods.”

Keeping that low profile would quickly prove impossible. The company soon became known as “Big Brown” and developed into a global behemoth.

Today, UPS employs 440,000 people worldwide — a workforce nearly as large as the United States’ standing army of 460,000. It has one of the largest commercial airlines fleets in the world and delivers 2.7 million packages and messages in the United States and 2.8 million to 220 other countries daily. UPS boasts, “We’re a company that every day moves 6 percent of US GDP and 2 percent of global GDP through our system.”

UPS is densely unionized, unlike its almost entirely nonunion twin FedEx. Both are the darlings of the business media. Along with 250,000 members of the Teamsters — mostly drivers and hub workers — UPS pilots are represented the Independent Pilot Association (IPA), and some of its mechanics are members of the International Association of Machinists (IAM).

UPS Freight, formerly Overnite transportation, has around about 13,000 Teamsters based in the traditional heavy-duty bulk freight industry who work under local union contracts. The package delivery wing that most people are familiar (with their ubiquitous brown delivery trucks) has over 230,000 members.

A majority — somewhere around 55 percent, according to organizers’ independent estimates — of these UPS Teamsters are part-timers whose start pay is an abysmally low $10 to $11 per hour. For three decades, starting pay for part-timers was a miserable $8 to $8.50 per hour. Part-timer poverty, along with brutally high productivity, subsidized UPS’s massive expansion in the 1980s and 1990s.

Yet, despite all the logistic services that UPS offers — and the declaration of Jack Levis, UPS’s senior director of process management, that, “We’ve really turned from a trucking company with technology to a technology company with trucks” — it is still primarily a package delivery company. UPS doesn’t manufacture any goods nor it is a retailer.

Amazon’s inspiration lies elsewhere.

Sam Walton’s Heir

Unlike UPS’s early attempts at flying under the radar, Amazon’s rise has been anything but quiet. Founded in Seattle in 1994, it has become one of the most visible brands in the world and an intimate part of their daily lives of tens of millions of people.

Amazon founder Jeff Bezos is the fifth-richest person in the world, worth nearly $72 billion and treated by some with a similar cult-like reverence to the late Apple founder Steve Jobs.

Unlike the taciturn Casey, who lived and died in a cloistered world of UPS, Bezos is a highly visible public figure. He recently purchased one of the most important newspapers in the country, the Washington Post. Billboard actually asked him if he had any plans to run for president. (He said no.) He even made a cameo appearance in Star Trek Beyond.

His flair for public relations is well known. Amazon’s promotion of drone deliveries has captured the attention of the general public. The company also was granted a patent Jules Verne-like floating warehouses.

Much of Bezos’s business model has been influenced by Sam Walton’s Walmart. In the last chapter of Walton’s autobiography Made in America, published around the time of his death in 1992, he mused on whether another company could match or surpass Walmart’s success:

My answer is of course it could happen again. It’s all a matter of attitude and the capacity to constantly study and question the management of business.

He added:

If I were a young man or woman starting out today with the same talents and energies and aspirations that I had fifty years ago, what would I do? … Probably some of kind of specialty retail, something to do with computers, maybe.

Walton’s musings strongly hint at the possibility of an Amazon-like company as his successor. But what did Bezos learn from Walmart?

“Bezos had imbibed Walton’s book thoroughly and wove the Walmart founder’s credo about frugality and a ‘bias for action’ into the cultural fabric of Amazon,” according to business reporter Brad Stone in his book The Everything Store. Bezos was especially taken by Walton’s willingness to use “the best ideas of his competitors.”

Bezos was so enamored by Walmart that he poached a large number of its executives in the late 1990s. Walmart sued in response, arguing that Amazon was stealing its “trade secrets”; Walmart ultimately lost the suit.

One of the ideas Bezos borrowed from Walton was working his employees past the point of exhaustion. An early Amazon executive, for example, suggested to Bezos that because parking was so expensive near Amazon’s first headquarters and warehouse in Seattle, the company should subsidize bus passes for its workers. Bezos apparently “scoffed” at the suggestion.

“He didn’t want employees to leave and catch the bus,” the executive said. “He wanted them to have their cars there so there was never any pressure to go home.”

Amazon’s working conditions worsened through the two decades of the twenty-first century as it rapidly expanded its warehouses or distribution centers (“fulfillment centers” in Amazonese) across the country.

The Allentown Morning Call conducted an investigation into Amazon’s working conditions in its Breinigsville, Pennsylvania, warehouses. After interviewing twenty current employees in 2011, the Morning Call reported:

Workers said they were forced to endure brutal heat inside the sprawling warehouse and were pushed to work at a pace many could not sustain. Employees were frequently reprimanded regarding their productivity and threatened with termination, workers said. The consequences of not meeting work expectations were regularly on display, as employees lost their jobs and got escorted out of the warehouse. Such sights encouraged some workers to conceal pain and push through injury lest they get fired as well, workers said.

In 2015, working conditions for Amazon’s staff at its Seattle campus were exposed by the New York Times to be just as horrendous:

Workers are encouraged to tear apart one another’s ideas in meetings, toil long and late (emails arrive past midnight, followed by text messages asking why they were not answered), and held to standards that the company boasts are “unreasonably high.” The internal phone directory instructs colleagues on how to send secret feedback to one another’s bosses. Employees say it is frequently used to sabotage others. (The tool offers sample texts, including this: “I felt concerned about his inflexibility and openly complaining about minor tasks.”)

The white-collar staff are told to be guided by the company’s leadership principles, “14 rules inscribed on handy laminated cards.” One of those rules: “Leaders are right a lot. They have strong judgment and good instincts.”

Amazon’s success is due to its massive online retail operation, honed to customer satisfaction on a mind-boggling array of products that few other traditional brick-and-mortar retailers — notably the venerable and declining Sears, which Walmart surpassed in sales in 1989 — or other online retailers have been able to compete with.

So the announcement in July 2015 that Amazon was valued more than Walmart shouldn’t have come as a total surprise.

While Walmart is still the world’s biggest retailer in terms of revenue, Amazon’s evolution from a start-up in a modest office building to a retail juggernaut employing more than 97,000 employees [in 2015] has changed the shape of the retail industry.

Walmart pioneered the creation of the modern logistics corporation with the management of entire supply chains, from the manufacturer of consumer goods to their placing on the store’s shelves. Amazon is attempting to do the same thing — without, until recently, the construction of retail stores — with one addition: controlling customer delivery through its own fleet of drivers.

Operation Dragon Boat

If Amazon is able to build its own delivery fleet, its impact on the logistics industry could have the greatest impact on the warehousing and delivery business since the deregulation of the US freight and aviation industries in the late 1970s and early 1980s.

Amazon has launched own air transport network, an ocean freight forwarding company, direct delivery operations, and the myriad of small, barely “independent” subcontractors servicing the final customer delivery of packages. Not since UPS’s frantic efforts to build an air delivery operation to catch up with overnight pioneer FedEx or FedEx’s construction of a freight operation to match its Big Brown rival has a logistics company in so short a time built such a formidable operation.

According to documents obtained by Bloomberg, “Amazon intend[ed] to create a revolutionary system that will automate the entire international supply chain.” Furthermore,

A 2013 report to Amazon’s senior management team proposed an aggressive global expansion of the company’s Fulfillment By Amazon service, which provides storage, packing, and shipping for independent merchants selling products on the company’s website. The report envisioned a global delivery network that controls the flow of goods from factories in China and India to customer doorsteps in Atlanta, New York, and London. The project, called Dragon Boat, is proceeding, according to a person familiar with the initiative, who asked not to be identified because the information isn’t public.

Four years later, according to Business Insider, Amazon has 214 logistics facilities across the United States, including fulfillment-center warehouses; sortation centers, where packages get presorted for shipping; Amazon Pantry and Amazon Fresh, which deliver groceries; and Amazon Prime Now hub, a separate building to store one-hour delivery items. Twenty-eight more distribution centers are expected to be built this year.

Amazon recently announced that it will invest $1.5 billion to build a massive air hub based in the Cincinnati/North Kentucky (CVG) International airport. “The project will bring up to 2,700 jobs and forty Boeing 767s to CVG, according to officials, with six hundred full-time jobs coming initially,” according to the Cincinnati Business Courier. The air hub is squarely within the region known as “Cargo Alley,” where planes can reach nearly 80 percent of the continental United States within two hours.

“We believe Amazon may be the only company with the fulfillment/distribution density and scale to compete effectively with global UPS/FedEx/DHL,” declared a report by Baird Equity Research, a leading financial consulting firm.

Walmart consciously built its distribution centers in remote, conservative regions of the country to avoid the threat of unionization. “Amazon, on the other hand,” Mark Meinster, the director of Warehouse Workers for Justice, told me,

builds in or close to major cities. Their Kenosha facility (and nobody had built warehouses in Kenosha before Amazon) the workforce is more diverse. Amazon builds in bigger labor markets [like] Chicago, [where] they have fulfillment centers on Goose Island, 28th and Western, Lisle, Joliet, and Morton Grove [both inside the city and in several surrounding suburbs]. Amazon has reversed the model of warehousing pioneered by Walmart.

This offers an opportunity to organize Amazon workers, since its drivers interact often with Teamsters drivers.

Socialists and the workplace struggles ahead

Ken Paff, national organizer of the Teamsters for a Democratic Union, says the lessons of past contract battles at UPS will be important for future organizing during the upcoming contract battle at UPS and for future organizing at Amazon.

“When the Teamsters decisively defeated UPS during the 1997 strike, under the banner of “Part-Time America Won’t Work,” John Sweeney, the then-head of the AFL-CIO, said that ‘the successful 1997 UPS strike was worth a million house calls,’ ” Paff said, referring to the organizing tactic of visiting workers at home that is central to any organizing campaign. “He was right. Amazon workers — just like all workers — will want to join a union that knows how to win.”

When the Teamsters won their battle against UPS in 1997, expectations were raised throughout the entire labor movement. Immediately following the strike, activists began talking about organizing FedEx (a campaign that has yet to be successful).

A fighting union is the best advertisement for organizing new, nonunion workers. A big contract win at UPS in 2018 will help draw sympathetic union supporters from Amazon to the Teamsters.

Eighty-five percent of the nearly three-and-a-half million workers employed in logistics in the United States are located in large metropolitan areas — inadvertently recreating huge concentrations of workers in many of those areas that were supposed to be “emptied” of industrial workers. There are about sixty such “clusters” in the United States, but it is the major sites in Los Angeles, Chicago, and New York-New Jersey, each of which employs at least 100,000 workers, and others such as UPS’s Louisville “Worldport” and FedEx’s Memphis cluster, that exemplify the trend.

The organizing opportunities this presents — at both companies — should be clear to the Left.

When I spoke to Mark Meinster last year about the many challenges facing organizers in the non-union logistics industry, he thought we needed a spark to ignite organizing efforts. “We need something big like the 1997 UPS strike or the 2006 immigrant’s rights marches.” Do we have that now with millions marching against Trump?

The widespread interest in socialist ideas and the explosive growth of the Democratic Socialists of America (DSA) shows that there is a generation willing to fight for greater political change. If socialists are able to channel that willingness into an industrial strategy, a plan to head to the shop floor and organize one’s coworkers, we could shake the foundations of the twenty-first century American economy.

This August is the twentieth anniversary of the 1997 UPS strike; a strike that defeated one of the most powerful corporations in the world. Now that much more of the U.S. economy revolves around the logistics industry, the 1997 contract campaign and strike looked like the strike of the future. Let’s seize the opportunity.